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GP to spin off and merge SP Richards with Essendant
Posted on Friday, 13 April 2018 11:14
Genuine Parts (GP) is spinning off wholesale distribution arm SP Richards into a separate entity that will then combine with Essendant in a Reverse Morris Trust-structured deal. The resulting merged workplace products distributor will have pro forma net sales of USD 7.00 billion and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of USD 300.00 million, or a 4.2 per cent margin. Known as Essendant following the amalgamation, the combined company “will have a stronger and more flexible balance sheet, which will enable it to reduce leverage, invest in the business and provide value to shareholders”. It is expected to have more than USD 75.00 million in annual run-rate cost savings – through sourcing, supply chain and selling, general and administrative efficiencies – and over USD 100.00 million in working capital improvements. Pro forma liquidity of USD 400.00 million or more “will provide ample flexibility to fund growth and integration initiatives”. GP said its shareholders will hold 51.0 per cent of Essendant, which will retain headquarters in Deerfield, Illinois, and Atlanta, Georgia. The automotive replacement parts distributor added it would get USD 347.00 million in cash as part of the deal that implies a valuation of about USD 680.00 million for SP Richards. As the business products arm of GP, this subsidiary distributes more than 98,000 everyday essentials, like copy paper, office and printer supplies, to over 9,700 resellers and distributors from a network of 54 distribution centres. SP Richards had revenues of about USD 2.00 billion in 2017, of which the facility, breakroom and safety segment accounted for USD 700.00 million, following by office (USD 655.00 million), technology (USD 370.00 million) and furniture (USD 275.00 million). Essendant had net sales of USD 5.00 billion across janitorial, foodservice and breakroom (USD 1.30 billion), office (USD 1.20 billion), technology (USD 1.20 billion), automotive and industrial (USD 900.00 million), and furniture (USD 300.00 million). © Zephus Ltd